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At Microsoft Corp.s 2005 Worldwide Partner Conference in Minneapolis this past weekend, Microsoft worked to soothe its ailing partner channel with a slew of new initiatives including the 2.0 release of the Microsoft Partner Program and product upgrade highlights across the board.
As part of the upgraded Partner Program, announced in 2003, Microsoft will launch four new Solution Competencies: Custom Development Solutions; Mobility Solutions; Licensing Solutions; and OEM Hardware Solutions.
A new Business Specialist Community enables partners to access software, training and other resources, while a Partner Learning Center, rolled out to 60 subsidiaries and available in 34 languages, provides training online.
A Web-based tool, Response Management for Partners, helps users escalate issues directly to Microsoft, while a Solution Finder tool enables Microsoft customers to find partners on Microsofts Web site.
In terms of hard-dollar support, Microsoft announced that each of its global subsidiaries will reallocate 50 percent of their global marketing funds—previously set aside for direct marketing—to help partners build their business through joint marketing with Microsoft.
While the new initiatives amounted to incremental steps forward, the efforts to smooth channel relations are critical for Microsoft if it wants to succeed with its huge investment in business applications, according to analysts and partners.
Its no secret that Microsoft has had challenges with its channel strategy, particularly in the MBS (Microsoft Business Solutions) division, which has 9,200 global partners and develops five separate Enterprise Resource Planning packages: Great Plains, Solomon, Navision, Axapta and Microsoft CRM.
Reports of conflicts amongst partners—with little guidance from Microsoft—are less common now than two years ago, but there are still confusing messages from Microsoft regarding the direction of its separate ERP packages.
Those issues have been compounded by some difficult times with the MBS division itself.
Year-over-year growth for MBS is less than one-half of 1 percent, and its racked up some nail-biting losses over the past two years: $70 million in the second half of last year, and $193 million in the second half of 2003.
While MBS is the second-smallest of Microsofts seven business units, trailing just behind mobile devices, it is still a key aspect of Microsofts strategy to verticalize its offerings—something that can only be done through the applications division, according to Joshua Greenbaum, principal of Enterprise Applications Consulting.
Business Solutions is also critical to Microsofts strategy to convince partners to sell up and down the stack—infrastructure to applications—enabling it to better compete with the likes of SAP AG and Oracle Corp., who are increasingly able to offer infrastructure and applications in a single package, to the midmarket.
To its credit, at its Convergence user conference in March, Microsoft finally began providing some details around Project Green.
It dropped the idea of rewriting the four suites onto a single code base and instead said it would service-enable the suites, which in turn will enable users to build composite applications.
While the clarification helped some partners ease customer concerns—and to better understand Microsofts direction—it still hasnt solved all the channel issues.
Microsofts biggest problem is navigating the channel and providing a clear path for partners, according to some partners.
The company needs to get to market quickly with its next generation of applications, create some excitement around that release, and help partners understand the product integration, according to Dan Duffy, president and CEO of ePartners Inc., Microsofts Gold Partner of the year.
Microsoft also needs to incentivise partners to invest in their business, which in turn helps Microsoft grow.
“The fact that we are the global partner of the year, as a $70 million seller, speaks to the issue,” said Duffy, in Dallas. “Microsoft needs to have some global system integrators get in the game, and they need to bring more quality partners to the dance and say, Hey, SAP SI, add Axapta to your portfolio.”
Duffy said he would also like to see more application verticalization—a path Microsoft is vigorously heading down—providing deep industry capability that will help ePartners better compete with the likes of Oracle, which has deep vertical expertise in areas like manufacturing and, with recent acquisitions, retail.
At the same time, because of the sheer volume of its partner channel, Microsoft faces a significant challenge in making strategic changes quickly.
“Thats part of the problem: How fast can Microsoft change course when it has to drag all these partners with it,” said IT analyst Greenbaum, in Berkeley, Calif. “Versus Oracle, which is changing the rules and running with it as fast as it can, and SAP that is running all over the place. Microsoft is limited by how much they can do.”